Before Thanksgiving, we discussed the potential for two bipartisan legislative vehicles in the short term – a potential mid-December bill in the Senate addressing the expiring Affordable Care Act (ACA) enhanced premium tax credit (PTC) and a mid-January bill to (hopefully) fund the government for the remainder of the fiscal year. This week, we game out the potential for a partisan Republican-only reconciliation bill.

Calls for a second reconciliation bill were heard before the ink dried on the One Big Beautiful Bill Act (OBBBA). After a several-month lull, talk of reconciliation resurfaced in recent weeks. While the need for near-perfect Republican unanimity in both chambers is challenging, a number of factors could drive another reconciliation effort. Depending on polling and economic numbers, President Trump could demand a reconciliation bill if Republicans need an economic jolt heading into the midterm elections. His continuing frustration with the Republican senators' refusal to abolish the filibuster surely widens the road toward reconciliation, at least as an option.

Trade considerations may also drive action, either in response to a potential adverse Supreme Court decision regarding the president's ability to adjust tariffs under the International Emergency Economic Powers Act (IEEPA) or the need for a vehicle to implement the president's promised $2,000 tariff "rebate dividend." Other potential drivers for a reconciliation bill include (i) a Republican-only healthcare effort if a bipartisan agreement on the extending the PTC fails, or (ii) the section 899 international "retaliation" proposal if the side-by-side carve out for U.S. firms falters or stalls at the Organisation for Economic Cooperation and Development (OECD) Pillar 2 tax talks. All signs, however, including a recent declaration of the G20 Heads of State, continue to point to sufficient progress in the Pillar 2 talks to obviate the need for section 899. 

Perhaps the last chance at a reconciliation bill is a potential midterm change in party control of the House or Senate, which may may propel a lame-duck bill before divided government kicks in. Democrats did this in late 1980 after suffering major election losses and Senate control in the wake of President Reagan's landslide victory.

Whether a second reconciliation bill emerges (and what it may entail) is uncertain. The direction and speed of political winds can change fast, so it's always important to monitor developments in the tax arena. Almost any moving tax vehicle could open opportunities for additional tax relief, but risk new revenue raisers, particularly if there is a need to fund other priorities such as new trade or healthcare initiatives. #TaxTake

Upcoming Speaking Engagements and Events

Marc will speak at the UT Law 73rd Annual Taxation Conference on December 3.

Mike will speak at the IFA 6th Annual International Virtual Tax Conference on December 11.

Mike and Katherine Jordan will speak at the ABA 2025 Criminal Tax Fraud and Tax Controversy Conference on December 12-13.

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